Analysis & Opinion

-- Winsway has given a profit warning ahead of its financial results for
2012 that suggests its financial performance has deteriorated significantly
from our base-case scenario.

-- We are uncertain if the China-based coking coal supply and logistics
provider can turn around its performance in 2013.

-- We are lowering our long-term corporate credit rating on Winsway and
the issue rating on its outstanding notes to 'B' from 'B+'. We are also
lowering our Greater China regional scale ratings on Winsway and on the notes
to 'cnB+' from 'cnBB-'.

-- We are placing all the ratings on CreditWatch with negative
implications.

Rating Action

On Jan. 21, 2013, Standard & Poor's Ratings Services lowered its long-term
corporate credit rating on Winsway Coking Coal Holdings Ltd. to 'B' from 'B+'.
At the same time, we lowered the rating on the company's senior unsecured
notes to 'B' from 'B+'. We also lowered our long-term Greater China regional
scale rating on Winsway and on the notes to 'cnB+' from 'cnBB-'. In addition,
we placed all the ratings on CreditWatch with negative implications. Winsway
is a China-based coking coal supply and logistics provider.

Rationale

We downgraded Winsway because we are unclear if the company can turn around
its financial performance in 2013 following an expected loss in 2012. A recent
profit warning from Winsway suggests that its financial results for 2012 could
be significantly below our previous base-case expectations.

Based on our preliminary analysis, Winsway's cash flow protection will likely
remain weak in 2013, due to depressed coal prices, high inventory, and the
uncertain ramp-up of a new coal mine in Canada. Standard & Poor's expects
China's GDP to grow to about 8% in 2013 with a modest increase in steel
demand, limiting the upside to coal prices. Sharp declines in coking coal
prices last year led Winsway's customers to renegotiate supply contracts,
reducing profit margins.

In our opinion, the company's business model of back-to-back contracts with
customers has not protected Winsway from its exposure to coal-price
volatilities.

We are also unclear when transport links and production at Winsway's Canada
operations will improve. Canada's Westshore Terminals port closed late last
year, and this affected the already-weak profitability of Grand Cache Corp.
(GCC), a coal mine that Winsway recently acquired.

In the absence of asset sales, Winsway's management of working capital and
liquidity will be critical for the company to weather the current difficulties.

CreditWatch

We aim to resolve the CreditWatch placement in the coming weeks. Our
assessment of the rating depends on Winsway's liquidity position and the
company's likely operating performance and cash flows in 2013. We could lower
the rating by one notch if we believe Winsway's liquidity in the next 12
months will deteriorate and the company will not have sufficient cash sources
to meet its obligations.

We could affirm the rating with a negative outlook if we believe Winsway's
operating performance can improve, which depends on higher coal prices and an
increase in GCC's production and shipments.

In resolving the CreditWatch, we will focus on: (1) how Winsway will preserve
its cash and lower its cost position amid the current conditions; and (2) how
reduced profit would affect the company's access to bank financing.